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Plenty of homeowners find themselves waiting for mortgage rates to drop before hitting the housing market. While there’s much more that goes into homeownership preparedness than a low mortgage rate, there are multiple ways to lower your rate without having to rely on market movements. Between temporary and permanent rate buydowns, you can lower your monthly mortgage payment by lowering your interest rate either temporarily or permanently. Although they sound similar, there are plenty of differences between the two types of rate buydowns and several factors that might make one better for specific homebuyers than another. Below, we’ll outline the benefits and major differences between rate buydowns to help you understand what might be best for your unique circumstances. Permanent Rate Buydowns Permanent rate buydowns are a strategy where homebuyers pay additional upfront fees (commonly referred to as points) to their lender in exchange for a reduced interest rate over the entire term of the loan. Unlike temporary rate buydowns, which only offer reduced rates for a set period, typically at the beginning of the loan, permanent buydowns provide lasting savings by prepaying a portion of the interest upfront. This investment offers stability and predictability, as borrowers can budget for lower monthly payments over the entire loan term, particularly advantageous in a rising interest rate environment. Determining whether a permanent mortgage rate buydown is right for you depends on various factors including your financial situation, short and long-term future plans, and market conditions. Homebuyers prioritizing long-term savings and stability, especially if they plan to stay in their home for an extended period, may find permanent buydowns appealing. However, it's essential to weigh the upfront cost against potential long-term savings. Temporary Rate Buydowns Temporary rate buydowns allow homebuyers to secure a reduced interest rate for a specified period at the beginning of the loan term. Unlike permanent rate buydowns, temporary buydowns provide short-term relief by lowering initial monthly payments. While temporary rate buydowns provide immediate relief with reduced initial payments, they return to the original rate after the specified period. Because of this, the interest rate reduction can be particularly beneficial for borrowers with budget constraints, those expecting their income to increase in the future, or those who plan to refinance after a short period. Temporary rate buydowns can be paid by buyers, but there are certain situations where homebuyers can use seller concessions or specific offers from builders to earn reduced mortgage payments for the first year or first couple years of their loan. Rate buydowns are a great option for homebuyers looking to reduce their monthly mortgage payment for either a temporary or permanent period. While the two sound similar, they have different costs associated and aren’t always the best option for every buyer. If you have any questions about what kind of rate buydown might be right for you, feel free to reach out for a free consultation!

Last week’s inflation data came in a little hotter than expected and, combined with slowed GDP growth and low jobless claims, mortgage rates rose slightly last week. With inflation moving in the wrong direction the last three months, there will be a much bigger emphasis on the job market breaking for the Fed to cut rates this year. We have three big pieces of employment data coming this week as well as the Federal Reserve’s 2-day May meeting ending on Wednesday, so expect some movements this week. Next week, May 6th at 11:30am, we are recapping the Federal Reserve meeting during a special edition of our Monday Market Update. Our resident market experts will recap the meeting and review what was said by Fed Chairman, Jerome Powell, to provide a look ahead at what we can expect with the summer housing market. This event will be free to stream live on YouTube, follow this link and subscribe for a notification when we go live! Last Week's Rate Recap - Rates Rose Slightly The Federal Reserve has been trying to slow the rate of inflation since 2022, but last week’s PCE data showed that we are continuing to trend away from their target of 2.7%. Although the PCE report came in as expected, it still sent stocks and mortgage bonds higher and put increased pressure on labor data to get our desired rate cuts this year. This Week's Rate Forecast - Rates Could Be Volatile This week we have two main areas of focus for the housing market and mortgage rates. Tomorrow and Wednesday, the Federal Reserve will hold its May Fed Meeting. Although a rate cut is unfortunately all but off the table, Jerome Powell’s press conference will give us insight into their path forward. We also have multiple labor reports, and, as we mentioned earlier, an increase in unemployment will be key for any future rate cuts. We’ll have the ADP employment report on Wednesday, initial jobless claims on Thursday, and the BLS jobs report on Friday, so expect some volatility in the second half of the week. Once again, our market experts will be offering a full breakdown of the Fed Meeting and how the decisions made and rhetoric released will impact the housing market next Monday at 11:30am ET on YouTube live. This presentation is free to stream and will offer loads of educational insight that will help empower you this purchase season. You can watch this and all our weekly Market Update streams right here on the UMortgage YouTube channel!

As a homeowner, you’ve almost certainly heard of a refinance. What you might not know is that there’s a lot more to a refinance than simply just getting a new mortgage rate. In this blog, we’ll break down the basics of refinancing your mortgage, how they work, the different types of refinance, and the type of refinance that might work best for you. What is a Refinance and How Does One Work? A home refinance replaces your current mortgage with a completely new home loan. When you refinance, your new lender typically uses your new, refinanced mortgage to pay off your existing mortgage. This way, you’re left with one monthly payment that has a new interest rate and principal (or the total balance owed on the loan). If the following steps sound familiar, that’s because they are! The process for refinancing your home is a lot like your original mortgage process when you first bought your home ­— this time without the added stress of shopping for your home and competing offers on the home you’re itching to buy. Application & Locking Your Rate When you decide to refinance, you’ll need to submit an application with your income, credit score, and any current debts to ensure that you meet the eligibility requirements to refinance. Once you’re approved, you’ll be quoted with a new interest rate. Just like when you bought your home, you can lock your rate for up to 60 days to ensure you still have access to your quoted rate if mortgage rates rise. You can also have the option to float your rate; this means that you can potentially access a lower rate if they drop over time, but it also puts you at risk of getting a higher rate if they increase before you close. Underwriting & Closing Upon submission of your application and subsequent approval, your new loan will go through underwriting. During underwriting, your lender will cross-reference the financial documents and information you submitted for accuracy. They’ll also require a refinance appraisal to determine the value of the property you’re refinancing. This appraisal is key to a cash-out refinance, which we’ll cover in more detail below. Assuming you pass underwriting, it’s time to close your loan! Your lender or Loan Originator will send your Closing Disclosure (CD) which outlines all the final figures – including your new interest rate, closing costs, loan amount, and more. When it comes time to close, you’ll review the details of the loan, sign your loan documents, and pay any necessary closing costs. If you’re doing a cash-out refinance, this is when you’ll receive the money owed to you by the lender; but again, we’ll outline cash-out refinances in greater detail a little later. Different Types of Refinance So, now that you know how a refinance works, let’s cover the different types of refinances that are commonly used by homeowners. Below, we'll go more in-depth on rate & term refinances and cash-out refinances and expand on the ways that these two options work. Rate & Term Refinance The most popular type of refinance — and what you probably first think of when you think about a refinance — is a rate & term refinance. True to the name, this kind of refi simply updates the interest rate and the term (or the repayment length of your loan). Homeowners choose to get a rate & term refi when they want to lower their monthly mortgage payment. This makes the most sense for you if interest rates are significantly lower now than they were when you initially bought your home. Another option with a rate & term refinance is to shorten the term of your loan. This typically leads to a higher monthly payment but can significantly lower the total amount of interest paid on your loan. Cash Out Refinance If you’re looking to tap into the equity you’ve earned in your home to help pay for a home project or consolidate another debt, you might consider a cash-out refinance. When you get a cash-out refinance, you essentially replace your existing mortgage with a new loan that’s larger than your current loan balance. The difference between your existing mortgage balance and your new mortgage is the amount of cash you receive. It's crucial for homeowners to understand that the larger loan amount means higher monthly payments and increased overall interest costs over the life of the loan. Therefore, careful consideration and thorough financial planning are essential before opting for a cash-out refinance to ensure it aligns with their long-term financial goals. How to Know if a Refinance is Right for You Now that you know the basics of refinances, how do you know if a refinance is right for you? Consider the points below. If one of these situations resonates with you, then a refinance might be on the cards for you! Reduce Your Monthly Mortgage Payment The most common reason homeowners refinance their homes is to reduce their monthly mortgage payments with a lower interest rate. Before you refinance to lower your monthly payments, consider your break-even point after considering closing costs. If you think you’ll only live in and/or own this property for another couple of years, it might cost more to refinance than it would to keep your existing mortgage. Utilize Your Home Equity Your home is an investment that gives back as much or more than what you put into it. If you want to complete a kitchen remodel, pay off existing debt, or generally get some funds for a one-time expense, you can use a cash-out refinance to tap into the equity you’ve been building since buying your home. Change the Length of Your Loan If you are comfortable paying a higher monthly mortgage payment to reduce the amount of interest you pay over the life of your loan, you can get a rate & term refinance to shorten the term of your loan. If you shorten your loan from a 30-year to a 15-year, you’ll pay more upfront but less over time since you’re accruing less interest. Change Your Loan Type If you have an adjustable-rate mortgage and want to switch to a fixed-rate mortgage to have a more stable monthly payment, a rate & term refinance is a great option for you. The same can apply if you have an FHA loan and want to switch to a conventional, a conventional loan and you want to utilize your VA benefits, or generally see another loan program that might work best for your individual situation. It’s a great idea to consult with your UMortgage Loan Originator to get an expert’s opinion when changing your loan type. Eliminate Mortgage Insurance If you financed your home with an FHA loan or your down payment was less than 20%, you were required to lump Private Mortgage Insurance (PMI) into your monthly mortgage payment. Often, mortgage insurance can account for up to $200 of your monthly payment — those dollars really stack up over time! By refinancing to a conventional loan from an FHA loan or refinancing after having reached 20% equity in your home, you can refinance to eliminate your PMI payments from your mortgage. - There are plenty of great reasons to refinance your mortgage and a plethora of different types of refinances that can fit your unique financial situation. Your situation is unique, so if you’re still wondering what type of refinance might be best for you, reach out to your UMortgage Loan Originator for a personal consultation.

Buying a home can seem a lot more daunting than it is from the outside looking in. It’s one of the biggest financial commitments you can make, but with proper preparation and an understanding of the process, you can make sure your homebuying journey is a breeze. Below, we’ve broken down the homebuying process into 11 steps. Some steps are more fun than others, but all will contribute to a life-changing purchase. Step 1: Assess Your Readiness Becoming a homeowner is a life-changing commitment that has benefits that will last a lifetime. But before you decide to start the homebuying process, you must assess your readiness. Financial preparation is important, but being mentally and emotionally ready is almost just as important. When you buy a home, you should expect to live there for at least three years to make the purchase worthwhile. When you decide to start the process, consider a few of your goals for the next couple of years. Do you plan on staying in the same job? Are you buying with a partner? Do you think you might want to start a family in the near future? Identifying these big-picture goals can help you realize if you’re ready to buy a home. Step 2: Get a Snapshot of Your Financial Situation Buying a home is likely the biggest financial decision you can make. Before you start the process, you’ll want to make sure that you have your finances in order and a plan in place. You’ll want to check your credit score. Healthy credit is one of the cornerstones to getting a favorable rate when you apply for your mortgage. If you need to improve your credit score, check out our blog on the steps to take to repair your credit. If you want to a good idea of what you can afford, use our affordability calculator! This uses your credit score, annual income, monthly debts, down payment, and an estimate of your interest rate based on location, credit, down payment, and loan term to provide you with an approximate maximum home price and monthly payment. Step 3: Budget For a Down Payment & the Other Homebuying Fees Your down payment and closing costs are perhaps the largest lump sum that you’ll spend when you buy a home. The down payment is your one-time payment towards the purchase of your home. Many individuals believe that a 20% down payment is required, but in some cases, you can get a conventional loan with as little as 3% down! There are caveats to a lower down payment, though. Although you are paying less money upfront, you’ll most likely have to pay mortgage insurance which can increase your monthly payment. For many first-time homebuyers, there are down payment assistance programs that can offer financial health through the form of a forgivable grant. DPA programs vary from state to state and even city to city, so speak with an expert to learn what’s available in your area! If you have friends or family members who can afford to help, you can also use gift money to increase your down payment. Rules regarding gift money vary by loan program. You’ll also need to save some money to cover closing costs, which are the fees you pay to get your loan. Typically, closing costs are around 3-6% of the home’s value. Your loan type, lender, and location will determine how much your closing costs will be. Step 4: Create a List of Wants and Non-Negotiables Do you want a fixer-upper or something that’s move-in ready? Would you rather live in a walkable area or something that’s got more land? And if you’re considering starting a family or already have one, which areas have better school districts? These are the questions you’ll want to have nailed-down answers to before you hit the market. Knowing your wants and needs from the jump will be hugely beneficial when it becomes time to start searching for homes. Step 5: Connect With an LO and Get Pre-Approved You wouldn’t go shopping without your wallet. Well, shopping for a home without a pre-approval letter is the same thing. Once you’ve assessed your readiness, budgeted, and analyzed what you want in your home, connecting with a loan originator to get a pre-approval is the first official step of the homebuying process. A pre-approval letter will give you a solid estimate of your homebuying budget. Getting pre-approved is quick and can be done over the phone. A loan originator will pull your credit score and ask you basic questions regarding your income and other debts to provide you with a number that you can use as a point of reference when narrowing down your home search by list price. Not only does a pre-approval give you a solid budget to work off, but it also shows sellers and real estate agents that you’re a serious buyer and can access financing. It also will make the actual loan application process go by quickly since you already have most of these financial documents handy, easing stress down the line. Step 6: Find a Real Estate Agent & Start Shopping It’s not necessary to hire a real estate agent, but it’s hugely beneficial and highly recommended. An experienced real estate agent will know the ins and outs of your local market, help you find homes on the market and ones hitting the market in the future, write your offer letter, and assist in negotiations. There are a few different ways that you can find a good real estate agent. Most people will ask friends or family members if they recommend the agent they’ve worked with, and if you’re already working with a loan originator, they likely have some partners that they work with and trust as well. With a pre-approval letter in hand and a trustworthy real estate agent by your side, the fun begins; it’s time to hit the housing market! Your real estate agent will help send you listings and even some homes that haven’t hit the market yet. When you’re looking at homes in person and online, this is when your list of wants & non-negotiables comes in handy. Try to keep note of the things you like and dislike about each home so you can reevaluate when comparing your options. Step 7: Make an Offer Now that you’ve found the home that ticks all the boxes and is within your budget, it’s time to make an offer! This is where your real estate agent will really come in handy. They’ll be able to pull comparable sales information and insight from the selling agent to gauge how much competition you might face for the home and whether the seller is motivated to sell quickly. From here, they’ll help you write the offer and provide their insight to make sure you get a good deal. If your offer is rejected, you can work with your agent to make a counteroffer, or you can continue your home search. Negotiations can take some time, and this is where you should lean on your agent’s expertise. Once you have an offer accepted, there are just a few steps to go! Step 8: Apply For Your Mortgage Now that you’ve had your offer accepted, you know how much you’ll need to lend in order to buy your home. Working with your loan originator, you’ll go through your options to pick the mortgage that works best for you. When you work with experienced loan originators like myself, we can shop rates for you from a portfolio of different lenders to find the rate and term that works best for the buyer’s individual circumstances. The process for getting your mortgage involves quite a few financial documents that you’ll have to gather. Here’s what you should prepare when you’re ready to apply: Tax documents for the last two years Bank statements for the last couple of months Pay stubs for the last two months Proof of any other income or funds (like gift money) Driver’s license and social security number There’s plenty that goes on behind the scenes when you take your loan from application to clear-to-close, but when you’re buying with UMortgage, you can rest easy knowing that your loan is being handled by our best-in-class Operations team. Once you’re approved, your loan will go into underwriting. Here, your lender makes the final decision and approves your loan once everything is reviewed. Step 9: Get a Homeowners Insurance Policy & Schedule an Appraisal Before you close on your home, you’re required by lenders to secure a homeowners insurance policy and have your home appraised. These are two conditions that lenders require you to meet before closing on your home. You’ll want your homeowners insurance policy to have enough coverage to fully replace the home’s value and to become effective on your closing date. Your appraisal is required to make sure the lender isn’t lending you more money than the home is worth. Typically, the lender will order the appraisal for you and will bill you directly for the cost. Step 10: Have the Home Inspected Although this is an optional step, it’s highly recommended to ensure that the home you’re about to commit to is in good condition. When you’re paying upwards of tens of thousands of dollars for your down payment and closing costs, the last thing you want is to find out that you’ve got a faulty water heater or HVAC unit to burn a hole in your pocket once you’ve moved in. Home inspections typically cost anywhere from $200 to $700. If your inspection finds any major issues, you typically have a contingency that allows you to back out of the agreement before you close. If any relatively minor issues are discovered, you can negotiate with the seller to have the repairs made or have them pay you to fix them after you’ve moved in. Although it’s optional and could seem like a good place to cut costs before you start signing checks on the closing table, getting a thorough home inspection is a relatively small cost to ensure you’re not saddled with any large and unexpected repair costs once you’re settled in your new home. Step 11: Close On Your Home & Move In! The 11th and final step of your homebuying process is the most exciting. All the hard work put in to budget, save, house hunt, and provide all the necessary documentation to get your mortgage culminates in you putting pen to paper and making the home yours. At least three business days before your closing date, your lender will provide you with your closing disclosure. This document clearly outlines all the costs that go into finalizing your mortgage and the costs that are due from you at closing. On or before your closing date, you’ll do a final walkthrough of the home with your real estate agent. During your walkthrough, you should check to make sure that any potential repairs negotiated after your inspection have been made and that all agreed items, such as appliances, are accounted for in the home. It might seem like a long and arduous process, but buying a home is one of the most rewarding investments you can make. Working with experienced professionals will go a long way towards making it as stress-free and smooth as possible. If you’re ready to get started, contact your UMortgage loan originator for an initial conversation!